Outgoing Bank of England governor Eddie George today said that the weaker pound had provided some support to the UK economy in the midst of disappointing global economic performance over the past year. While there has been an impact on the UK from negative developments overseas, this has come "with a bit of a cushion from a weakening exchange rate," George said in a hearing before the parliamentary Treasury committee. The reasons for disappointment in global economic growth over the past year include the shock from corporate accounting failures in the US, and its consequent impact on global equity markets, he noted.
The other main source of weakness came from uncertainties during the buildup to the war in Iraq, he added. The committee hearing is to address the BoE's quarterly inflation report released in mid-May. However, sterling has been enjoying a rally against the euro this week, hitting a two month high this morning which pushed the single currency down to STG0.6914. George departs his post at the end of the month, to be replaced by current deputy governor Mervyn King. //www.fxcentre.com